The present invention is directed generally to a system and method for aggregating data and predicting the profitability and productivity of licensed (e.g., by governmental agencies) professionals (e.g., insurance agents, building contractors, broker/dealers, mortgage brokers, real estate agents, financial advisors, accountants, etc.), and, more particularly, to a system and method for aggregating data from a number of public and, if available, internal or proprietary data sources to derive a predictive scoring model or algorithm that can be used to generate a score that is indicative of the future profitability and productivity of licensed professionals to be recruited, appointed, hired or otherwise selected to provide services (e.g., in the case of insurance professionals, to write insurance policies for an insurer).
The present invention has application with respect to a wide spectrum of industries and licensed professionals. However, for ease of discussion herein, the present invention is principally described in the context of the insurance industry and licensed insurance professionals, with the understanding that the present invention is not limited to the insurance industry and licensed insurance professionals.
Insurance companies use many different agency distribution systems. An agency distribution system is the network of agents or producers that includes life insurance-only agents, property and casualty agents, health insurance agents and other agents and producer entities. Within the group of life insurance-only agents, there are two primary categories: (i) exclusive or “captive” agents who represent only one insurance company or insurance brand; and (ii) independent full-time personal producers who represent more than one insurance company or insurance brand. The property and casualty agents also fall into these same two broad categories. The other agents and producer entities may include real-estate agents, automobile dealers, independent consumer products sales representatives, stock brokers, bank representatives or any business with an agent/broker sales, distribution, or producer force.
The exclusive-agent strategy involves recruiting, financing, training and housing agents, all referred to as agency-building. Within the agency-building system are general agencies or branch offices headed by either general agents or agency managers, respectively. General agents are appointed by the home office of the insurance company and operate as independent contractors for the insurance company with expense allowances paid to cover items such as rent, clerical help, travel and other office related expenses. Agency managers are employees of the insurance company and are directly supervised by the home office.
The non-agency system has several subsets, which include, brokerage companies, personal-producing general agents (PPGA's), marketing organizations and producer groups. Brokerage companies gain access through an insurance company employee, typically a brokerage supervisor, who is authorized to appoint brokers for the insurance company. PPGA companies gain access through either (i) an insurance company employed regional director, (ii) independent contractors known as managing general agents (MGAs), or (iii) direct contracting through advertising media. Marketing organizations are independent organizations through which the entire distribution function is delegated. Producer groups consist of high-producing agents who agree to place a minimum amount of business with a company in return for a share of the profits, normally through a reinsurance agreement or stock purchase option.
Within the property casualty insurance industry, the distribution strategy is very similar to that of the life insurance industry. Distribution often varies by the type of specialty coverage and the types of subcoverages within the major lines of coverage.
The problem of recruiting, hiring and appointing new insurance agents is challenging, often requiring extensive time and monetary commitments during the process. The difficulties with finding the right composition of technical and marketing skills are compounded by real world marketplace pressures such as the need to maintain an “ease-of-business-use” process with the agents, and the high levels of compensation offered by competitors attempting to attract the most productive and profitable agents.
In the insurance industry, there are several approaches used in attracting and retaining the highest quality agents. One approach is to identify the most profitable and productive agents and directly offer the most generous compensation package available. A second approach is to advertise through the mass media and attempt to attract the best agents by an interview and testing process. Still another method is to hire all corners and hope to retain the best 15% or so over the following five years.
Under the first approach, the act of recruiting an agent is based on the innate desire of agents to achieve the highest monetary rewards. Identifying agents based on these criteria is not always as measurable and predictable as an insurance company might desire. Under the second approach, the target marketing attracts those who are actively looking for a new agent/insurance company relationship. This method does not always attract the highest quality individual agent; that is, those who are the best producers are less likely to be actively looking for a change in agent and insurance company affiliation. The final method mentioned above entails a large expense for companies. There are costs in technology support, sales support, incentive programs, training, Insurance Marketplace Standards Association (IMSA) compliance and communication to name a few.
None of the foregoing methods incorporates a rigorous method for the identification and appointment of insurance agents to the benefit of the insurance companies. The sale of profitable insurance would result from finding more conservative and careful agents to write the business. This would result in both coverage that is more profitable and better retention of policyholders and agents.
Despite the availability of alternative methods of recruitment, the insurance industry predominantly uses traditional methods of targeting and attraction. Such traditional techniques have not resulted in any marked increase in agent retention over the last twenty years. The agent selection and appointment system has relied on business practices that are very informal and traditionally lax. The appointment system and method that is in wide use within the insurance industry today is predicated on a model developed from traditional practices that rely on subjective analysis of a series of personal interviews, resumes and application forms. Little emphasis is placed on using a scientific method to assess the potential or future profitability and productivity of insurance professionals (agents/brokers/producers).
In addition, the insurance industry has not effectively included the use of external data sources in the determination of agents' potential or future success rates. External data offers one of the best opportunities to obtain the characteristics of the business and or the practices of the agent to be appointed, which in turn would be essential for matching the correct company culture identifiers. While insurance companies have occasionally looked to external data sources to supplement their conventional hiring practices, the use of any such external data source has been at best haphazard, inconsistent, and relegated to a final, subjective perspective. In the insurance industry, these practices have resulted in methods that, although occasionally using external data sources, are generally specific to the data and business practices of a particular insurance company and have not been applied in a consistent and statistically rigorous fashion.
Ideally, an insurance company would appoint an agent based on the agent's ability to produce future profits and increase productivity for the insurance company, i.e., the appointment should be a function of the future profit potential of the business brought to the insurance company or future productivity of the producing agent. Such potential profit drivers cannot be known in advance, hence the introduction of risk in the appointment and recruitment process. The more accurate the assessment of a producer's productivity and profitability, the more certain the choice of the individual insurance agent being appointed. The agent/broker/producer recruitment process of the insurance company should account for this risk so that more effort is placed on recruiting those insurance agents who are deemed to have the highest propensity for future profitability and productivity, while less effort is spent on those high-risk agents who are not likely to generate high profits or be productive.
Accordingly, a need exists for a system and method that perform a complete profitability and productivity evaluation for producers that does not rely exclusively on conventional recruiting and hiring methodologies and practices (e.g., in the insurance industry). A still further need exists for such a system and method that extends conventional methodologies (e.g., insurance industry methodologies) to quantitatively include producers' characteristics and business practices, and other non-traditional-based characteristics. A still further need exists for such a quantitative system and method that utilize external data sources to generate a unique statistical model that is predictive of future profitability and productivity of producers (e.g., insurance agents, brokers and producers.) Desirably, the statistical model may also utilize a particular company's (e.g., insurance company's) internal data, business practices, and particular corporate culture to further improve the predictiveness of the model.